TOWSON, Md., April 25 /PRNewswire-FirstCall/ -- The Black & Decker
Corporation (NYSE: BDK) today announced that net earnings for the first
quarter of 2007 were $108.1 million or $1.61 per diluted share, versus
$113.1 million or $1.45 per diluted share for the first quarter of 2006.
Sales increased 3% for the quarter to a record $1.6 billion. The
acquisition of Vector Products, Inc. contributed 1% to sales in the
quarter, and foreign currency translation had a positive 2% impact. Free
cash flow increased by more than $115 million to a record $137 million for
the quarter.
Nolan D. Archibald, Chairman and Chief Executive Officer, commented,
"Black & Decker had a strong quarter despite a difficult demand environment
in the U.S. Outstanding international results drove growth in the Power
Tools and Accessories segment and helped us exceed our initial sales and
earnings forecast. We are pleased that our performance rebounded quickly
after a setback in the fourth quarter of 2006.
"Sales in the Power Tools and Accessories segment increased 2% for the
quarter. In the U.S., order rates and sell-through at key retailers
improved sequentially from the fourth quarter of 2006. The favorable order
trend, combined with two months of incremental Vector sales, helped the
U.S. Consumer Products Group increase sales at a high single-digit rate.
The U.S. Industrial Products Group continued to face weak demand in
residential construction and reported a mid single-digit rate of sales
decline. The European business posted sales growth in the high
single-digits and continued to deliver an operating margin above 12%. In
Latin America, we continued to generate robust sales growth, and operating
margin rose sharply. Despite significant commodity inflation, operating
margin for the Power Tools and Accessories segment increased slightly to
12.4%, driven by productivity, expense control and better product mix.
"Sales in the Hardware and Home Improvement segment decreased 2% for
the quarter. Lockset sales decreased at a mid single-digit rate, as a large
decline in the new construction channel overshadowed a solid performance at
retail. The Price Pfister faucet business grew sales at a mid single-digit
rate, driven by strong orders for new products. Operating margin in the
Hardware and Home Improvement segment decreased to 11.2% for the quarter,
as the price increases we implemented did not fully offset rising commodity
costs.
"Sales in the Fastening and Assembly Systems segment increased 1% for
the quarter. Continued growth in Asia and improvement in the European
industrial division outweighed weakness in the automotive sector. Operating
margin in this segment increased to 15.8% for the quarter.
"While it is early in the year, the record $137 million of free cash
flow in the first quarter represents an encouraging start. We continued to
manage inventory carefully, and working capital was favorable to 2006. Free
cash flow increased more than $115 million versus the prior year, even
after adjusting for an income tax payment in 2006 related to the
repatriation of foreign earnings.
"Looking ahead, we remain cautious in our outlook for the year. Some of
our outperformance in the first quarter related to sell-in growth in excess
of sell-through, which is not sustainable. In addition, we expect that
weakness in the housing industry will continue to put pressure on the U.S.
economy and our end markets. We also face an increasing level of commodity
inflation, primarily reflecting rising nickel prices. Therefore, we are
only modestly increasing our full-year diluted EPS guidance to the range of
$6.35-to-$6.60. For the second quarter, we expect roughly flat sales and
diluted EPS in the range of $1.70-to-$1.75. We continue to expect to
convert at least 90% of full-year net earnings to free cash flow.
"This quarter demonstrated the value of the structural improvements we
have made at Black & Decker over the last five years. We are a more
balanced company than ever before, and our international performance played
a key role in our success this quarter. Strong cash generation and
disciplined stewardship of capital over an extended period helped us
protect EPS in a difficult environment. We continue to strengthen our
brands through meaningful innovation and remain excited about our long-term
prospects. We are weathering this slowdown effectively and plan to deliver
outstanding returns to our shareholders."
The Corporation also announced that its Board of Directors declared a
quarterly cash dividend of $0.42 per share of the Corporation's outstanding
common stock payable June 29, 2007, to stockholders of record at the close
of business on June 15, 2007.
The Corporation will hold a conference call today at 10:00 a.m., E.T.,
to discuss first-quarter results and the outlook for the remainder of 2007.
Investors can listen to the conference call by visiting http://www.bdk.com
and clicking on the icon labeled "Live Webcast." Listeners should log-in at
least ten minutes prior to the beginning of the event to ensure timely
access. A replay of the call will be available at http://www.bdk.com.
This release includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. By their nature, all forward-looking statements
involve risks and uncertainties. For a more detailed discussion of the
risks and uncertainties that may affect Black & Decker's operating and
financial results and its ability to achieve the financial objectives
discussed in this press release, interested parties should review the "Risk
Factors" sections in Black & Decker's reports filed with the Securities and
Exchange Commission, including the Annual Report on Form 10-K for the
fiscal year ended December 31, 2006.
This release contains non-GAAP financial measures within the meaning of
Regulation G promulgated by the Securities and Exchange Commission.
Included with this release is a reconciliation of the differences between
these non- GAAP financial measures with the most directly comparable
financial measures calculated in accordance with GAAP.
Black & Decker is a leading global manufacturer and marketer of power
tools and accessories, hardware and home improvement products, and
technology- based fastening systems.
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Millions Except Per Share Amounts)
Three Months Ended
------------------------------------
April 1, 2007 April 2, 2006
----------------- -----------------
SALES $ 1,577.2 $ 1,528.9
Cost of goods sold 1,016.6 985.3
Selling, general, and
administrative expenses 391.0 375.4
----------------- -----------------
OPERATING INCOME 169.6 168.2
Interest expense (net of
interest income) 21.5 13.7
Other expense 1.1 -
----------------- -----------------
EARNINGS BEFORE INCOME TAXES 147.0 154.5
Income taxes 38.9 41.4
----------------- -----------------
NET EARNINGS $ 108.1 $ 113.1
================= =================
NET EARNINGS PER
COMMON SHARE - BASIC $ 1.66 $ 1.49
================= =================
Shares Used in Computing Basic
Earnings Per Share (in Millions) 65.1 76.0
================= =================
NET EARNINGS PER COMMON SHARE -
ASSUMING DILUTION $ 1.61 $ 1.45
================= =================
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 67.1 78.2
================= =================
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
April 1, 2007 December 31, 2006
----------------- -----------------
ASSETS
Cash and cash equivalents $ 226.3 $ 233.3
Trade receivables 1,195.3 1,149.6
Inventories 1,098.7 1,063.5
Other current assets 243.3 257.0
----------------- -----------------
TOTAL CURRENT ASSETS 2,763.6 2,703.4
----------------- -----------------
PROPERTY, PLANT, AND EQUIPMENT 602.5 622.2
GOODWILL 1,188.7 1,195.6
OTHER ASSETS 720.2 726.5
----------------- -----------------
$ 5,275.0 $ 5,247.7
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 234.3 $ 258.9
Current maturities of
long-term debt 150.1 150.2
Trade accounts payable 567.9 458.5
Other current liabilities 846.8 912.0
----------------- -----------------
TOTAL CURRENT LIABILITIES 1,799.1 1,779.6
----------------- -----------------
LONG-TERM DEBT 1,170.2 1,170.3
POSTRETIREMENT BENEFITS 482.9 482.4
OTHER LONG-TERM LIABILITIES 651.5 651.8
STOCKHOLDERS' EQUITY 1,171.3 1,163.6
----------------- -----------------
$ 5,275.0 $ 5,247.7
================= =================
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION ABOUT BUSINESS SEGMENTS
(Millions of Dollars)
Reportable Business Segments
--------------------------------------------------
Power Hardware Fastening
Three Months Ended Tools & & Home & Assembly
April 1, 2007 Accessories Improvement Systems Total
-------------------------------------------------------------------------
Sales to unaffiliated
customers $ 1,148.1 $ 246.8 $ 172.4 $ 1,567.3
Segment profit (loss)
(for Consolidated,
operating income) 142.0 27.7 27.3 197.0
Depreciation and
amortization 24.1 7.2 5.0 36.3
Capital expenditures 12.7 4.8 2.3 19.8
Three Months Ended
April 2, 2006
-------------------------------------------------------------------------
Sales to unaffiliated
customers $ 1,125.6 $ 251.9 $ 171.0 $ 1,548.5
Segment profit (loss)
(for Consolidated,
operating income) 138.3 33.6 24.3 196.2
Depreciation and
amortization 26.6 5.8 4.7 37.1
Capital expenditures 19.9 1.6 2.7 24.2
Currency Corporate,
Three Months Ended Translation Adjustments,
April 1, 2007 Adjustments & Eliminations Consolidated
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ 9.9 $ - $ 1,577.2
Segment profit (loss)
(for Consolidated,
operating income) 1.7 (29.1) 169.6
Depreciation and amortization .3 .6 37.2
Capital expenditures .1 .2 20.1
Three Months Ended
April 2, 2006
--------------------------------------------------------------------------
Sales to unaffiliated customers $(19.6) $ - $ 1,528.9
Segment profit (loss) (for
Consolidated, operating income) (2.1) (25.9) 168.2
Depreciation and amortization (.4) .7 37.4
Capital expenditures (.3) - 23.9
The reconciliation of segment profit to the Corporation's earnings
before income taxes, in millions of dollars, is as follows:
Three Months Ended
--------------------------------------------------------------------------
April 1, 2007 April 2, 2006
--------------------------------------------------------------------------
Segment profit for total reportable
business segments $ 197.0 $ 196.2
Items excluded from segment profit:
Adjustment of budgeted foreign
exchange rates to actual rates 1.7 (2.1)
Depreciation of Corporate property (.2) (.2)
Adjustment to businesses' postretirement
benefit expenses booked in consolidation (4.8) (6.2)
Other adjustments booked in consolidation
directly related to reportable business
segments 1.3 (2.3)
Amounts allocated to businesses in arriving
at segment profit in excess of (less than)
Corporate center operating expenses,
eliminations, and other amounts identified
above (25.4) (17.2)
--------------------------------------------------------------------------
Operating income 169.6 168.2
Interest expense, net of interest income 21.5 13.7
Other expense 1.1 -
--------------------------------------------------------------------------
Earnings before income taxes $ 147.0 $ 154.5
==========================================================================
BASIS OF PRESENTATION
Adoption of New Accounting Standard Relating to Income Taxes:
-------------------------------------------------------------
As more fully described in Note 1 of Notes to Consolidated Financial
Statements included in Item 8 of the Corporation's Annual Report on Form
10-K for the year ended December 31, 2006 (the 2006 Form 10-K), the
Corporation was required to adopt FASB Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxes-an interpretation of FASB
Statement No. 109, as of January 1, 2007, with any cumulative effect of the
change in accounting principles recognized as an adjustment to opening
retained earnings.
FIN 48 provides guidance for the recognition, derecognition and
measurement in financial statements of tax positions taken in previously
filed tax returns or tax positions expected to be taken in tax returns. FIN
48 requires an entity to recognize the financial statement impact of a tax
position when it is more likely than not that the position will be
sustained upon examination. If the tax position meets the
more-likely-than-not recognition threshold, the tax effect is recognized at
the largest amount of the benefit that is greater than fifty percent likely
of being realized upon ultimate settlement.
FIN 48 permits an entity to recognize interest related to tax
uncertainties as either income taxes or interest expense. FIN 48 also
permits an entity to recognize penalties related to tax uncertainties as
either income tax expense or within other expense classifications. As
anticipated and consistent with its past practice, the Corporation
recognized interest and penalties, if any, related to tax uncertainties as
income tax expense upon adoption of FIN 48. The Corporation recognized the
cumulative effect of the change in accounting principles required to adopt
FIN 48 effective as of January 1, 2007, as a reduction of opening retained
earnings in the amount of $7.3 million.
Business Segments:
------------------
The Corporation operates in three reportable business segments: Power
Tools and Accessories, Hardware and Home Improvement, and Fastening and
Assembly Systems. The Power Tools and Accessories segment has worldwide
responsibility for the manufacture and sale of consumer and industrial
power tools and accessories, lawn and garden tools, and electric cleaning,
automotive, and lighting products, as well as for product service. In
addition, the Power Tools and Accessories segment has responsibility for
the sale of security hardware to customers in Mexico, Central America, the
Caribbean, and South America; for the sale of plumbing products to
customers outside the United States and Canada; and for sales of household
products. On March 1, 2006, the Corporation acquired Vector Products, Inc.
This acquired business is included in the Power Tools and Accessories
segment. The Hardware and Home Improvement segment has worldwide
responsibility for the manufacture and sale of security hardware (except
for the sale of security hardware in Mexico, Central America, the
Caribbean, and South America). The Hardware and Home Improvement segment
also has responsibility for the manufacture of plumbing products and for
the sale of plumbing products to customers in the United States and Canada.
The Fastening and Assembly Systems segment has worldwide responsibility for
the manufacture and sale of fastening and assembly systems.
The profitability measure employed by the Corporation and its chief
operating decision maker for making decisions about allocating resources to
segments and assessing segment performance is segment profit (for the
Corporation on a consolidated basis, operating income). In general,
segments follow the same accounting policies as those described in Note 1
of Notes to Consolidated Financial Statements included in Item 8 of the
2006 Form 10-K, except with respect to foreign currency translation and
except as further indicated below. The financial statements of a segment's
operating units located outside of the United States, except those units
operating in highly inflationary economies, are generally measured using
the local currency as the functional currency. For these units located
outside of the United States, segment assets and elements of segment profit
are translated using budgeted rates of exchange. Budgeted rates of exchange
are established annually and, once established, all prior period segment
data is restated to reflect the current year's budgeted rates of exchange.
The amounts included in the preceding table under the captions "Reportable
Business Segments" and "Corporate, Adjustments, & Eliminations" are
reflected at the Corporation's budgeted rates of exchange for 2007. The
amounts included in the preceding table under the caption "Currency
Translation Adjustments" represent the difference between consolidated
amounts determined using those budgeted rates of exchange and those
determined based upon the rates of exchange applicable under accounting
principles generally accepted in the United States.
Segment profit excludes interest income and expense, non-operating
income and expense, adjustments to eliminate intercompany profit in
inventory, and income tax expense. In determining segment profit, expenses
relating to pension and other postretirement benefits are based solely upon
estimated service costs. Corporate expenses, as well as certain centrally
managed expenses, including expenses related to share-based compensation,
are allocated to each reportable segment based upon budgeted amounts. While
sales and transfers between segments are accounted for at cost plus a
reasonable profit, the effects of intersegment sales are excluded from the
computation of segment profit. Intercompany profit in inventory is excluded
from segment assets and is recognized as a reduction of cost of goods sold
by the selling segment when the related inventory is sold to an
unaffiliated customer. Because the Corporation compensates the management
of its various businesses on, among other factors, segment profit, the
Corporation may elect to record certain segment-related expense items of an
unusual or non-recurring nature in consolidation rather than reflect such
items in segment profit. In addition, certain segment-related items of
income or expense may be recorded in consolidation in one period and
transferred to the various segments in a later period.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND REGULATION G
DISCLOSURE:
To supplement its consolidated financial statements presented in
accordance with accounting principles generally accepted in the United
States (GAAP), the Corporation provides additional measures of operating
results, net earnings, and earnings per share adjusted to exclude certain
costs, expenses, and gains and losses. Also, in addition to measuring its
cash flow generation and usage based upon operating, investing and
financial activities classifications established under GAAP, the
Corporation also measures its free cash flow. The Corporation believes that
these non-GAAP financial measures are appropriate to enhance understanding
of its past performance as well as prospects for its future performance.
This press release contains non-GAAP financial measures within the
meaning of Regulation G promulgated by the Securities and Exchange
Commission. A reconciliation of the differences between these non-GAAP
financial measures with the most directly comparable financial measures
calculated in accordance with GAAP follows.
Free cash flow:
---------------
The calculation of free cash flow, which is defined by the Corporation
as cash flow from operating activities, less capital expenditures, plus
proceeds from the disposal of assets (excluding proceeds from business
sales), for the three months ended April 1, 2007 and April 2, 2006, follows
(dollars in millions):
Three Months Ended
April 1, April 2,
2007 2006
-------- --------
Cash flow from operating activities $ 153.5 $ (4.8)
Capital expenditures (20.1) (23.9)
Proceeds from disposals of assets 3.6 5.6
-------- --------
Free cash flow $ 137.0 $ (23.1)
======== ========
This press release includes a statement that free cash flow for the
three months ended April 1, 2007, as compared to the three months ended
April 2, 2006, increased by more than $115 million. That increase excludes
tax payments that occurred in the first quarter of 2006 associated with
repatriating foreign earnings under the American Jobs Creation Act.
SOURCE The Black & Decker Corporation
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CONTACT:
Mark M. Rothleitner, Vice President, Investor
Relations and Treasurer, +1-410-716-3979, or Roger A. Young, Vice
President, Investor and Media Relations, +1-410-716-3979, both of
The Black & Decker Corporation
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